No room in social housing for a generation locked out of home ownership

An entire generation will be locked out of the housing market by high prices, the National Housing Federation (NHF) fears, while a chronic shortage of social housing means they will have no chance of a social home either.

The organisation’s stark warning came as it published a forecast that indicates tens of thousands of homeowners, who bought during the housing boom, face another four years of being trapped in negative equity.

People who purchased a property in England at the peak of the market in 2007 paid an average price of £216,800. But they have been warned they will have to wait until 2014 – when average prices are predicted to hit £226,900 – before they recover what they paid for their home seven years earlier, according to the research.

Independent economists Oxford Economics forecast house prices would increase 22 per cent over the next five years – fuelled by a chronic under supply of new housing.

According to the research, house prices will rise 7.5 per cent this year, but will then fall again in 2011 by 3 per cent, before recording a modest increase of 0.9 per cent in 2012. House prices will then increase by:
• 4 per cent in 2013
• 5.4 per cent in 2014, and
• 4.9 per cent in 2015 – 22 per cent higher than they were in 2009

Homeowners who bought during the peak of the market in 2007 are likely to experience continued negative equity until 2014 – based on average house price figures for England.

The NHF, which represents England’s housing associations, said it feared an entire generation of people would be locked out of the housing market as a result of high house prices. And the chronic shortage of social housing will leave those shut out of the home ownership market with little realistic chance of getting a social home.

The new report – Home Truths 2010 – shows the country is in the midst of the worst housing crisis for generations. It found:

•While demand is growing, supply of new housing is falling. In 2009/10 just 87,360 new homes were started in England, producing only enough homes for a third of the new households forming each year
•Despite the recent recession, house prices nationally are still 19 per cent higher than five years ago and 120 per cent higher than 10 years ago
•More than 1.76 million households, or the equivalent of 4.5 million people, were on social housing waiting lists in 2009, a 23 per cent increase in the last five years

According to Oxford Economics, the average house price in the English regions in 2015 will be:
•North East – £151,700 (compared to £148,100 in 2007)
•North West – £175,200 (£162,000 in 2007)
•Yorkshire & Humberside –£171,000 (£163,600 in 2007)
•East Midlands – £76,300 (£172,500 in 2007)
•West Midlands – £185,700 (£178,400 in 2007)
•East of England – £257,000 (£231,100 in 2007)
•London – £375,900 (£329,200 in 2007)
•South East – £306,900 (£267,000 in 2007)
•South West – £245,600 (£224,500 in 2007)

“For those who bought at the peak of the housing boom, there's a strong possibility that they will have to wait another four years before their home is actually worth what they paid for it,” said David Orr, the NHF’s chief executive.

"But house prices will inevitably increase in the long term because of huge under-supply of housing. Even though price rises look sluggish for the next few years, affordability is not improving for many low-to-middle income households – as banks continue to restrict their mortgage lending and house prices remain historically expensive in relation to salaries.

“There’s a very real risk that an entire generation will be locked out of the housing market for the foreseeable future and people will increasingly look to buy or rent an affordable home instead.

“But the Government’s decision to scrap regional house building targets, withdraw funding for new affordable housing schemes and to cut budgets, means the future looks bleaker than ever for millions of people currently stuck on waiting lists.

“Proposed caps on housing benefit payments could also put nearly a million people on low incomes at risk of losing their home – and further deepen the nation’s dire housing crisis. We would urge the Government to closely consider the huge human, social and economic cost of failing to invest in affordable housing."